Bill did nothing in a small way, as his ongoing battle with Koch Industries had shown. But even some of his closest friends, well acquainted with his take-no-prisoners temperament, thought Bill was delusional when, in 1990, he announced an audacious bid for the yachting world’s most coveted prize, the America’s Cup.
“Let me make sure I have this straight,” his friend and Cape Cod neighbor Louis Cabot deadpanned when Bill broke the news to him. “You’re thinking of entering the America’s Cup, where you have had no experience. You’re thinking of starting from scratch, finding designers and builders to put together this new boat that nobody has ever sailed, and hiring maybe a couple hundred people to run dozens of different departments in what will amount to a small corporation. You’re thinking of moving the whole show to San Diego and building what will amount to a small waterfront village.… And you’re thinking of doing all this in just seventeen months. Is that what you’re thinking?”
The smile that crept across Bill’s face answered the question; this was precisely what he had in mind.
Bill first learned to sail as a teenager aboard a 19-foot Lightning at Culver Military Academy. After he was cast out of Koch Industries, sailing became a sort of therapy for his estrangement from David, Charles, and their mother. Bill felt like a man without a family, like the umbilical cord had been unceremoniously clipped, but on the water with his crewmates, he discovered a new kind of brotherhood. “In a way,” he said in 1991, “this organization replaces the family harmony I never had.”
The America’s Cup is held every three to five years at the yacht club of its last victor; 1992’s was to be hosted by the San Diego Yacht Club, whose Stars & Stripes, with sailing legend Dennis Conner at the helm, had won back the America’s Cup from an Australian team in 1987. To build his racing syndicate, Bill took up residence in a $30,000-a-month bay-front rental in San Diego’s Point Loma. His world-class art collection, as usual, traveled with him. The house featured paintings by Monet and Cézanne, but the Boteros drew the most attention. The two large bronze sculptures that Bill showcased on his lawn included a rotund, cigar-smoking nude that locals unkindly dubbed “Roseanne,” after the comedienne and sitcom actress.
By then, Bill had relocated the corporate headquarters of Oxbow to Palm Beach, Florida, from Dover, Massachusetts, following a lengthy dispute with the Massachusetts tax authorities, who had slapped him with a massive tax bill following the buyout of his shares in Koch Industries. Bill took the Massachusetts Commissioner of Revenue to court, ultimately extracting a massive refund of more than $46 million, but the experience embittered him and he began looking around for a more tax-friendly locale in which to settle. Florida fit the bill.
In between bouts of litigation with Charles and David (and many other adversaries), Bill had spent the past six-plus years building Oxbow into a successful enterprise, with a focus on the development of alternative energy sources and a handful of geothermal power plants in the Western United States and abroad. By 1990, Oxbow claimed annual sales in excess of $1 billion. As Bill set his mind to building his racing syndicate, he handed day-to-day control of Oxbow to a trio of trusted executives. Bill’s friend Louis Cabot had pointed out that creating this sailing team would be very much akin to constructing a company from scratch. The team, which the mathematically minded businessman called America 3—a nod to his motto of “teamwork, technology, talent”—would eventually employ some 200 people.
A contrarian by nature, Bill eschewed the conventions of sailing from the outset as he built his syndicate. He passed over yachting’s most esteemed shipbuilders for a team of MIT scientists and recruited his crew largely from the sport’s less headstrong second string. Bill also had no intention of being the crew’s seventeenth man, an honorary slot reserved for boat owners living vicariously through their teams. He instituted an unusual rotation at the helm, in which he took a turn piloting the 70-plus-foot vessel.
Few thought the neophyte from landlocked Kansas, who spoke poetically of glimpsing a virtual ocean as a boy in the undulating prairie tall grass, had a shot at winning the vaunted international sailing race. His fellow yachtsmen viewed him as a dilettante, even a buffoon. “The bespectacled Koch was at various times during the competition referred to as clownish, arrogant and zany, and as the Gerald Ford of sailing,” Sports Illustrated reported at the time, noting that he was “so prone to on-board pratfalls that after twice being bonked on the head by a swinging boom he was presented with a San Diego Charger helmet by a local disc jockey.”
Annoyed by the less-than-warm reception he received from the locals and the yachting elite—especially supporters of Dennis Conner, with whom Bill was vying for the honor of defending the Cup—Bill at one point threatened to spin “Roseanne” 180 degrees. That way the Botero sculpture would have its backside pointed directly at the snobbish San Diego Yacht Club.
But nothing did more to quiet his critics than vanquishing Conner and his crew in a nail-biting series of races, the final of which, on May 1, 1992, was a blowout. That day, Bill’s gleaming white yacht sped so far ahead of Stars & Stripes that he couldn’t even make out the ads on Conner’s sails. When Bill had first announced his America’s Cup bid, the Las Vegas bookmakers had placed his odds at 100-to-1. Now he was defending the trophy against the Italian racing syndicate Il Moro di Venezia and its thirty-two-year-old skipper, Paul Cayard.
The month after defeating Conner, Bill and America3 edged past Il Moro in what had been a neck-and-neck race and cruised across the finish line 44 seconds ahead of the Italian crew. Reaching this euphoric moment had consumed nearly a year-and-a-half of Bill’s life and $68.5 million of his then-$650 million fortune. Moët rained down from every direction and family, friends, and America3 back office staff swarmed the yacht in zodiacs. As Bill’s boat cruised back into the harbor and passed the San Diego Yacht Club, he spotted the Cup on the dock; moments later he flung himself into the water and swam toward his prize, lifting the sterling silver trophy above his head when he reached it. The experience was life altering. “I learned a lot about myself,” Bill once said. “I learned I could do a lot more than I thought I could.”
Bill’s obsessive, single-minded quest for the trophy struck some of his fellow sailors as a pursuit rooted not in a love of sailing, but in his bitter, long-running rivalry with Charles and David. “The real issue is why did he want the Cup,” pondered Gary Jobson, a sailing legend who was one of Bill’s most trusted advisors as he assembled the America3 team. “I don’t think it has anything to do with sailing. I think it had to do with proving himself to his brothers.”
To David’s great surprise, Bill invited him to San Diego to sail with his team in a few early races. David turned down the offer—how could he go sailing with an estranged brother who had named him as a defendant in an ongoing lawsuit?—but he also declined an opportunity to chair Team Conner. “I can’t bet against my brother,” he said. Whatever Bill’s reasons for battling for the Cup, David was relieved that his twin had won it. Bill’s need to show the world his worth seemed so profound, so all-consuming—imagine how he would have reacted if he’d lost.
During the competition, The Wichita Eagle carried regular wire dispatches about Bill’s exploits, and he wasted no time making the most of his new fame in his hometown, a city where he hadn’t lived full-time since middle school. With the court docket ballooning in Koch v. Koch Industries, Bill and Frederick’s ongoing lawsuit over the stock buyout, Bill began lavishing money on Kansas in a not-so-subtle campaign to burnish his image among potential jurors. The month after the race, he displayed the trophy in the lobby of Wichita’s city hall. Later that summer Bill pledged $500,000 to create a 15,000-square-foot boathouse in Wichita on the east bank of the Arkansas River (in the same building where Fred Koch’s first office had been located), where Jayhawk, one of the racing yachts the America3 team had sailed, would be on permanent display outside. This was just the start of a philanthropic blitzkrieg. In the years to follow, he sponsored festivals and 5Ks. He footed the bill for the Reverend Jesse Jackson to address employees of the Wichita school district, and twice loaned his art collection to the local museum.
He also became an anticrime crusader. In 1994, after Bill and his son, Wyatt, then eight years old, attended a July Fourth fireworks display in Wichita where gang violence had erupted, he bankrolled a commission to study the state’s crime problem and develop recommendations to help at-risk youth.
“I’m a celebrity in Kansas,” he boasted. “I walk down the street and people ask for my autograph.” He grew close to the state’s Democratic governor, Joan Finney, who conferred on him the honorary title of admiral of the Kansas Navy. Bill—whose relationship with Joan Granlund, Wyatt’s mother, was on and off during their more than twenty years together—also began casually dating the state’s attractive attorney general, Carla Stovall, causing a minor scandal when he gifted her with a $5,000 diamond tennis bracelet that she was later forced to return.
Bill’s flashy style made him a hit with the Kansas press and helped him to cultivate local journalists. He had provided Kansas reporters with all-expenses-paid junkets to watch him compete in the America’s Cup. Two years later, in 1994, he offered local news outlets heavily subsidized trips to San Diego to cover his announcement of the formation of the first-ever all-female America’s Cup team, which would sail aboard a yacht he’d christened the Mighty Mary, after his late mother. (“She took my brothers’ side in all the legal fights, and I guess this is my way of forgiving her and asking her forgiveness,” he told reporters. “Corny, huh?”) The endeavor seemed to combine two of Bill’s passions: sailing—and fit, young women. There was surely some irony in the fact that, in the course of his tribute to female empowerment, he impregnated Marie Beard, a six-foot Texan who had tried out for the America’s Cup team (and in 1996 gave birth to Bill’s daughter, Charlotte).
The zany adventures of “Wild Bill,” as he came to be called, were far more appealing to local reporters than his brothers’ latest pipeline purchase or refinery expansion. The year he unveiled his female sailing syndicate, Bill appeared as the celebrity mystery guest at the Wichita Gridiron Club’s annual show, where as “Captain Koch” he donned a superhero costume in a comedy sketch about his efforts to “save” Kansas. Afterward, he footed the bill for local journalists and their spouses at an upscale Wichita restaurant, which one Kansas journalism professor considered part of Bill’s efforts to purchase “the best coverage money can buy.”
“Bill spent some time in Wichita and just delighted in saying scurrilous things—not for publication—but for people he partied with, and he partied with the press a great deal of the time,” said one veteran Wichita journalist. “The young reporters would come back with stories about what great fun he was. He was obviously courting them and doing one heck of a job of it, too, buying champagne by the magnums, et cetera. The parties went late into the night at the local pubs and they thought he was terrific. Of course, on the other side, here’s buttoned up Charles. The contrast couldn’t have been greater.”
By 1997, Bill’s stature had risen to such heights in Kansas that he was floated as a possible Democratic challenger to Republican Senator Sam Brownback—a prospect that must have made Charles shudder. He fueled rumors of a potential Senate bid by telling the Lawrence Journal-World that he was “listening to the suitors” and found the prospect of elected office “very seductive.” Focus groups Bill commissioned showed that, second to Bob Dole, Bill Koch was America’s best-known Kansan.
The fawning recognition Bill received for his philanthropy infuriated Charles and his supporters. “Billy’s brought his toys to town, shared them and people love it,” Sterling Varner fumed. “Meanwhile Charles has worked his butt off here. He put his heart into building this company. He’s given millions to charity and never said anything. Billy comes to town and builds a little boathouse and he’s a hero. We must be doing something wrong. If it weren’t for Charles, Billy wouldn’t even have a rowboat.”
In the mid-1990s, according to a former senior Wichita official, Koch Industries quietly complained about the boathouse—an aggravating monument to Bill’s sailing prowess—dispatching a lobbyist to city hall to express the company’s displeasure.
“Can you imagine how Charles feels when he drives through downtown Wichita on his way to the airport and has to see that every time?” the lobbyist asked. According to the former official, the lobbyist was told that Charles should consider taking another route, because the boathouse was there to stay. When in 1997 the state opted against reauthorizing Bill’s crime commission, the Topeka Capital-Journal cited sources (including Bill) who said that Charles had leaned on Kansas’s new governor, Bill Graves, to shutter the outfit.
It was all the state’s nonprofit community could do to stay out of the crossfire of the family feud. In one episode, the Kansas Sports Hall of Fame rejected a $50,000 contribution from Bill—along with a model of his America’s Cup–winning yacht for display—after learning that accepting the donation might jeopardize its funding from Koch Industries.
Bill knew his local involvement chafed Charles, and he was candid about the strategic motives behind his generosity. “I’ve had a lot of bad PR in Kansas and part of this is to level the playing field.”
Bill’s aggressive PR machine forced Charles and his notoriously closemouthed company to ramp up their own publicity efforts. In charity, as in everything else he did, Charles preferred to keep a low profile. He didn’t care about seeing his name enshrined on a plaque or memorialized on a building (at least one that didn’t belong to Koch Industries); in fact, he found that sort of attention embarrassing. For years, Charles and Liz Koch, along with Koch Industries itself, had donated generously, but quietly, to a variety of local causes. They paid for the Twilight Pops Concert at the annual Wichita River Festival, contributed to the city’s Institute of Logopedics (which focuses on speech disorders), gave to the local Boys & Girls Club and United Way, and provided a grant to fund a mobile mammography van. They bankrolled Shakespeare in the Park and underwrote a performance by Ray Charles to benefit the Wichita Center for the Arts. Charles also formed his own nonprofit, Youth Entrepreneurs, to educate Kansas students in business and economics.
As Bill splashed money around and nabbed headlines, Charles and Koch Industries had little choice but to respond in kind. “They became just much more engaged locally,” said the former city official. “I think they consciously wanted to build their local image. Bill Koch really smoked them out.” The more conspicuous tenor of their giving was evident in the combined $2 million gift Charles and Liz Koch and the company made to the local Salvation Army in 1994 for the construction of a new headquarters, dubbed the Koch Center.
But other factors may have influenced their effort at image building. One September evening in 1993, the Kochs’ sixteen-year-old son, Chase, blew through a red light as he sped down Wichita’s East Douglas Road on the way to a local mall. The teenager’s Ford Explorer barreled through the intersection just as twelve-year-old Zachary Seibert, listening to Kris Kross on his headphones, crossed the street. Seibert died at a local hospital about an hour later.
Rumors circulated that the Kochs would use their power and influence to make any charges disappear, but Charles and his family instead seemed determined that their billionaire status not become an issue. Instead of retreating behind the gates of their Wichita compound and leaving lawyers and crisis management professionals to handle the fallout, the enigmatic family made a public showing of support for the Seiberts. The Kochs escorted their traumatized son to the boy’s funeral, “where every eye in that church was on them,” one attendee remembered. Chase later pleaded guilty to a misdemeanor charge of vehicular manslaughter and was sentenced to 100 hours of community service and 18 months of probation. The judge also imposed a 9:00 p.m. curfew for 10 months. (This was a fairly harsh sentence, according to the special prosecutor in the case, who said an adult would have probably gotten off easier.)
“That was a tough deal to go through,” said Charles’s friend Nestor Weigand. “It was just a very, very painful time. I think it was one of those things that families do. They just do whatever they can to try to survive it.”
After his son’s accident, in addition to becoming more visible in his charitable giving, Charles and his company permitted the local paper rare access to write one of the first in-depth profiles of Koch Industries, its chief executive, and his family. It marked a new era of cautious public engagement for the company. “Before, our whole strategy was that no one needed to know anything,” Paul Brooks, a Koch senior vice president, said at the time.
Despite Charles’s best efforts, however, his estranged brother continued to enjoy widespread popularity, especially among state and local officials. The fact that they persisted in lauding Bill for his generosity stung Charles and others at Koch Industries. The company employed thousands of people in Kansas. Didn’t Bill’s friends in government realize that he was on a revenge-fueled crusade to destroy everything Charles had built?
Finally, in 1997, Koch Industries sent the state a subtle but unmistakable message when it announced plans to expand—in Houston, not Wichita.
“Billy is going to take five years off Charles’ life,” Nestor Weigand complained to The Wichita Eagle, telling the paper that the Koch family was aggrieved by a “lack of insight” into Bill’s motives. “Everything Billy does Charles feels deeply.”
“The only thing I do know,” Weigand said, “is the day this is over, Billy is gone. You won’t even see his smoke.”
Another layer of the conflict played out in the shadows. This war, like most, had its covert aspect, with allegations of espionage and skullduggery on both sides. Bill, especially, seemed to relish the use of cloak-and-dagger tactics, which over the years he employed not just against his brothers but against a wide range of rivals, including sailing competitors, employees, at least one former girlfriend, and the second of his three wives.
In the 1980s and 1990s, the brothers unleashed a small army of private investigators on each other. “We’re up against a very secretive company that operates like a cult,” Oxbow’s spokesman, Brad Goldstein, once told The New York Times, explaining the company’s heavy reliance on PIs.
The elaborate operations hatched by Bill’s operatives seemed right out of the CIA playbook. In one case, Vanity Fair reported, his crafty investigators established a phony company and posed as corporate headhunters in order to glean intelligence from ex–Koch Industries employees, donning body mics to secretly record their interviews.
Former Oxbow employees claim Bill’s investigators resorted to underhanded electronic surveillance techniques, including buggings and wiretaps. “He has bragged to me that he has had his brothers and other people tracked by private investigators and he has wiretapped their discussions,” one former Oxbow executive, Michael Aquilina, said in a 1988 lawsuit against Bill and his company. (Aquilina was fired from Oxbow after Bill accused him of submitting fraudulent financial statements.) Though Bill denied having his brothers followed or conducting any illegal surveillance—“I didn’t authorize using it, and never will,” he once said—he did acknowledge that he had on one occasion worn a bug, tucked into his breast pocket, to a meeting with J. Howard Marshall II. (“The recording wasn’t worth shit,” Bill said.)
Bill’s investigators also engaged in more low-tech methods: Seeking intelligence and clues to Koch Industries’ legal strategy, they pilfered trash from the homes and offices of Charles, David, and three of their lawyers, bribing janitors and trash collectors to gain access to their garbage, according to the brothers’ attorneys. (The Dumpster-diving operation resulted in a temporary restraining order in 1992 that prevented Bill and his legal team from “invading or interfering with the privacy and confidentiality of the defendants, their counsel, and their immediate families, either through efforts to obtain the trash from the personal residences or the offices” of the brothers or their lawyers.)
In Bill’s case, there was often little need to riffle through his garbage cans to dig up dirt, though perhaps Koch’s detectives tried it. He was, as Vanity Fair’s Bryan Burrough put it in a 1994 profile, “a man whose closet is free of skeletons in large part because they all seem to be turning somersaults in his living room.” Bill left a turbulent wake of controversy and litigation wherever he went, and his misadventures provided plenty of ammunition for Koch Industries. In its effort to discredit Bill as hyperlitigious, mentally unbalanced, and fueled by vengeance, the company’s PR shop created a dossier of Bill’s more memorable debacles. “Koch had done a bunch of opposition research on Bill Koch—a fact-based summary of litigation he’d been involved in, and what he’d done and said,” explained a former Koch executive. The company distributed this fifty-page opposition research file, titled “The Truth About Koch v. Koch Industries,” widely to reporters covering the legal drama.
The juiciest scuttlebutt often concerned Bill’s stormy personal life (he would eventually sire five children by four women: Wyatt with first wife Joan, Charlotte with girlfriend Marie Beard, William Jr. and Robin with second wife Angela Gauntt, and Kaitlin with third wife Bridget Rooney Koch). The tawdriest of his soap-operatic travails was revealed, as were so many of the Koch clan’s most intimate moments, in a drab courtroom, where in November 1995 Bill faced off against a former Ford model named Catherine de Castelbajac. He’d installed her in his seldom-used, $2.5 million pied-à-terre in the apartment section of Boston’s Four Seasons, but wanted to evict her now that their romance had cooled. (De Castelbajac, the wife of a French nobleman when they began their affair, also became a target of Bill’s detectives when she refused to vacate his apartment. They in turn uncovered her modest origins as, in Bill’s words, a “Santa Barbara surfing girl.”)
As Bill wooed de Castelbajac, he simultaneously juggled at least three other women, including Joan, whom he married in April 1994 to legitimize Wyatt for estate-planning purposes. He and Joan divorced not long after.
The sensational nine-day trial over de Castelbajac’s housing arrangements made news on both sides of the Atlantic, with tabloid editors one-upping each other with headline puns (such as, BEAUTY AND THE LEASE and JUST ONE OF THOSE FLINGS). It’s unlikely such titillating testimony had ever been heard in Boston housing court, where lurid details about the couple’s courtship were revealed (“She started kissing me quite passionately. I must admit I did not resist.”) and a series of steamy transcontinental faxes that passed between the pair were entered into evidence.
“Hot Love From Your X-rated Protestant Princess,” de Castelbajac signed one of the racy messages. She referred to herself in a separate fax as a “wet orchid” who yearned for warm honey to be drizzled on her body. In another, she wrote: “My poor nerve endings are already hungry. You are creating such a wanton woman. I can feel those kisses, and every inch of my body misses you.”
Bill’s far-less-sensuous facsimiles displayed the MIT-trained engineer’s geeky side: “I cannot describe how much I look forward to seeing you again,” he wrote. “It is beyond calculation by the largest computers.” In another fax, he jotted an equation to express his devotion, ending with a hand-drawn heart and, within it, the mathematical symbol for infinity.
In late November 1995, Bill won the court’s approval to evict the ex-model. Less than two weeks after the verdict was read, Bill’s newest love interest, thirty-three-year-old Marie Beard, announced she was three months pregnant with his child—and that she was moving into his Palm Beach mansion.
In the mid-1990s, an aura of Cold War–esque vigilance enveloped both Oxbow and Koch Industries. In addition to concerns about Dumpster-diving detectives and electronic eavesdropping, both factions also believed the other had slipped informants into their midst.
“We were all paranoid because of the tactics that were in use,” said a former Koch executive. “There was a paranoia at some point that my secretary was a Bill Koch plant. You saw something at every turn.”
Bill grew increasingly distrustful of everyone around him. “There were moles and spies all over,” he has said. He feared his brothers had tapped his phones and believed that Koch operatives had stolen documents from his offices. Once, in an effort to prove Koch spies had infiltrated Oxbow, Bill’s in-house counsel drafted a bogus memo and left it sitting conspicuously on his desk overnight. This fictitious document later turned up in a filing made by Koch Industries, according to Bill and his lawyers.
Bill had taken to furtively recording some of his phone calls on a Norelco Dictaphone, and he employed a shadowy security operator, Marc Nezer, to sweep for bugs and smoke out possible Koch moles. Employees occasionally spotted Nezer at the Oxbow offices on weekends slithering through the heating ducts. It was unclear whether he was combing for listening devices—or perhaps planting them.
Former employees say Bill had them surveilled in an effort to uncover those who might have betrayed him. Among them was Paul Siu, an Oxbow executive and close friend of Bill’s in the 1970s and 1980s. Suspected of spying for Bill’s brothers, he was canned from Oxbow. Afterward, Siu alleged that Bill had him tailed and bugged his phones. “After the proxy fight, he changed completely,” he noted. “… Bill was in the first stage of Howard Hughes syndrome. Very paranoid.”
Spy games became a way of life for Bill, and he used them prodigiously during his bid for the America’s Cup. The race has long had a reputation for a certain amount of espionage. Bill’s competitors, however, accused him of taking things to an absurd and unsportsmanlike extreme. He was unapologetic. “This is more than the gentlemanly sport it used to be,” he said. “This is war.”
Guzzini, a 30-foot Bayliner speed boat with blacked out windows and a full complement of electronics gear, became the emblem of Bill’s spy operation. As much for psychological warfare purposes as for intelligence gathering, it cruised the waters around San Diego, shadowing rival boats as crew members pointed handheld lasers at their quarry to record speed and telemetry data. The ever-present boat caused an uproar after a Guzzini deck hand, in a cheeky display of America3’s surveillance powers, spotted a group of rival sailors playing poker through long-range binoculars and radioed over to advise: “Keep the King. Discard the Jack.”
Bill’s team dispatched helicopters to track and photograph competitors and deployed divers (using rebreathers so the telltale bubbles wouldn’t arouse suspicion) to study the keels of rival yachts. (“I wasn’t alone,” Bill told the Palm Beach Post.) Nezer, Bill’s security specialist, who liked to cultivate a 007-esque mystique, also periodically materialized at the America3 team’s San Diego compound. “He just seemed to come and go,” said Gary Jobson, the syndicate’s tactician. “Nobody knew what he was doing. Somebody said he was a Mossad agent. I stayed away from him.” According to Jobson, Bill hired Italian speakers to lurk around the Italian team, and his investigators combed through the trash of rival syndicates seeking any morsel of information that might provide an advantage.
“They probably have a good idea of how many times we go to the bathroom, how many times I make phone calls,” huffed Il Moro’s skipper Paul Cayard.
Bill’s team was ultimately said to have spent more than $2 million on its intelligence and counterespionage activities. Following the race, America’s Cup officials, alarmed by the widespread spying, instituted a new regulation to curb future espionage. It was known informally as “the Bill Koch rule.”
“That’s been his whole life—private investigators with his brothers and trying to get an edge in all kinds of nefarious ways. The America’s Cup was right there for him,” said Jobson, who experienced his own harrowing brush with Bill’s security apparatus.
A decorated sailor who had won the America’s Cup aboard Ted Turner’s Courageous in 1977, Jobson began sailing with Bill in 1984. He had helped to convince the businessman to make an attempt on the Cup. With “his technical mind and my pragmatic strategic experience, we actually blended pretty well,” Jobson recalled.
At least for a time. A year into their America’s Cup bid, Jobson grew uncomfortable with Bill’s management style. “Bill is a guy that likes to have competitions between his people,” he explained. “You don’t know you’re in a competition, but he kind of likes to throw stuff out there—‘that guy is saying something about you’ and then he says the same thing to another guy. Then he sits back and watches the show.” In 1991, after receiving a job offer from ESPN, where Jobson saw a brighter future, he abruptly resigned from the team. Bill was incensed. “People don’t leave Bill Koch,” Jobson said.
After Jobson quit, Bill became convinced that his onetime tactician had turned on him and was leaking technical secrets to his America’s Cup opponents. Bill sicced private investigators on the sailor.
Jobson had an inkling something was amiss. “I had a bad vibe,” he remembered. “I’d put the garbage out, and the garbage can would be on the other side of the driveway the next morning and the garbageman hadn’t come yet. And my phone seemed to be tapped. I can’t prove it, but you would hear funny clicking noises when I talked on the phone. Something felt weird.”
Then Jobson arrived home one day to find a thick envelope on the doorstep of his rented home in Point Loma. It contained a 150-page surveillance report from the detective agency Bill had hired to track him—leaked, he surmised, by a member of the America3 organization who had taken pity on him.
“Holy Christ,” Jobson thought as he paged through the report, finding a terrifyingly detailed account of his comings and goings, “these guys have been following me around for months.” Later, as if in some spy thriller cliché, he peered out his window to see men snapping photographs of his house. Jobson hired a lawyer, who contacted Bill’s attorney, making clear that his client had hard evidence that Bill was having him watched. Soon after, Jobson said, the surveillance ceased.
Sailing rivals were one thing, but Bill reserved some of his most bellicose tactics for his brothers. His 1983 settlement with Charles and David had netted nearly a half-billion dollars, but not the respect—not even the handshake one competitor gives to a worthy adversary at the end of a hard-fought match—that he craved from Charles. Since then, Bill, often joined by Frederick, had taken his brothers to court repeatedly.
In 1985 Bill filed a lawsuit, Koch v. Koch Industries, in federal district court in Wichita, alleging that Koch Industries had obscured assets during the settlement talks. Not long afterward, Bill and Frederick battled their brothers over control of their father’s foundation. In 1991, they contested their mother’s will, which included a clause cutting any of Mary Koch’s children out of her estate if they did not drop pending litigation against each other within a certain time frame; the provision was aimed squarely at Bill and Frederick. The clause, Bill and Frederick argued, was the underhanded work of Charles, and the will itself was tainted because it had been drafted by the law firm representing Koch Industries. (A judge disagreed, finding that Mary was not subject to undue influence; Bill and Frederick also lost their case over the foundation.)
In Bill’s ongoing psychodrama with Charles, nothing was off the table. If he had to drag the family name out of the shadows and through the mud to achieve closure, then so be it.
In the mid-to-late 1980s, PIs working for Bill and his legal team swarmed over windswept towns across the Midwest chasing rumors that Koch Industries had stolen oil at the wellhead from remote production sites, some of them located on Native American reservations. His investigators deposed dozens of former employees, collecting handwritten affidavits and frequently offering as much as $300 per interview in compensation (a fact that would later allow Koch’s lawyers to argue their testimony had been purchased).
The ex-employees were salt-of-the-earth types who wore handlebar mustaches and had names like Harley. Many had worked as Koch oil gaugers, responsible for measuring the quantity and quality of the crude the company purchased. The process was not cut and dry. Petroleum contracts or expands based on the temperature. It ranges in density, and the amount of sediment and impurities in the product also affects the measurement. The job entailed taking a variety of measurements and readings to accurately calculate how much oil was being purchased. But the numbers could easily be adjusted or fudged, especially at far-flung lease sites that operated on the honor system, where a handwritten “run ticket” filled out by the gauger was the only record of the sale.
Koch gaugers, and others involved in the company’s oil gathering operations, described receiving instruction in how to manipulate measurements—shave an inch here, add one there, goose a temperature reading by 10 degrees—that ensured the company carted off more crude than it paid for. The process, these gaugers said, was known internally as the “Koch method.”
By adjusting various measurements, Bob Gould, who worked for the company for nearly two decades, explained that “on an average I would gain from 3 to 4 barrels of oil that Koch Oil Co. didn’t buy on each tank of oil” he processed. This didn’t sound like much. But multiplied by ten tanks a day, five days a week, and the overages would add up. And Gould was just one of dozens of Koch oil gaugers.
The gaugers said their superiors never told them explicitly to steal; rather they described coming under relentless pressure from higher-ups to “work the oil” in the company’s favor. “Let’s help Charlie out. That was a big phrase. Always help Charlie out, referring to Charles Koch,” remembered David Toliver, one former Koch gauger. Some of the company’s employees joked that Koch really stood for “Keep Old Charlie Happy.”
Bill’s self-initiated oil-theft probe was fortuitously timed. In 1987, the Senate had created a special investigative committee, chaired by Arizona Democrat Dennis DeConcini, to look into fraud and mismanagement afflicting Native American lands and institutions. With assistance from Bill, who opened up his files to the congressional investigators and teed up witnesses, the investigation expanded to include allegations of oil theft from tribal lands. If Charles treasured his reputation as a man of high principle and integrity, this would be an ideal opportunity to demolish it, Bill must have thought.
In 1988, an FBI agent named Richard J. “Jim” Elroy led a team of committee investigators into Oklahoma’s Indian country in the hopes of catching Koch and other oil companies in the act of stealing oil. Elroy, who was on loan from the bureau to assist with the committee’s investigation, was in his late forties, his dark hair graying at the temples. The tenacious FBI veteran could tell a good yarn, of which he had many from his eighteen years working public corruption cases, largely from the bureau’s Oklahoma City field office. Soon he would have another tale to tell.
Elroy and his team staked out eight randomly selected oil leases, struggling to find cover in the flat, wide-open terrain. The investigators crouched in ditches, behind cedar bushes, and in one case, hid among a herd of Hereford cattle, training a camera with a 600-millimeter lens on gaugers as they came and went. Once a gauger had pulled away, an investigator hurried out to conduct his own measurements of how much oil had been extracted. He compared that to how much oil the gauger said he’d taken on a handwritten “run ticket.”
A year later, on an overcast May morning in the nation’s capital, the committee held a widely covered hearing in the Dirksen Senate Office Building, where the panel’s chief counsel, Ken Ballen, questioned Elroy. (In a sign of just how closely Bill worked with the Senate investigators, he would later develop close ties to Ballen and Elroy. After retiring from the FBI, Elroy joined Bill’s retinue of private eyes.)
“Agent Elroy,” Ballen asked, “could you provide to the members of the committee… the results of the surveillance on the eight leases that was conducted by committee investigators?”
“On six of the eight we found they were stealing oil,” the FBI agent responded. “Two of the leases we found they were quite accurate.”
In each of the six cases where theft had occurred, Elroy testified, Koch Industries had been the purchaser.
Charles had told committee investigators earlier that year that gauging was “a very uncertain art” practiced by people who “aren’t rocket scientists.” Elroy had a different take: “I don’t know how you could draw any other conclusion but that this is top management-directed theft,” he told the committee.
Blindsided by the allegations, Koch Industries entered crisis mode. It hastily released a 57-page statement rebutting the charges and claiming that they were the product of Bill’s “vendetta.” The company’s general counsel, Don Cordes, alleged that the company had become the object of “political skullduggery.”
Koch Industries enlisted a quartet of current and former senators from Kansas and Oklahoma to complain to their colleagues on the committee about the “reliability” of the evidence and testimony investigators had gathered. And it hired a group of high-powered Democratic lobbyists, including the wife of Iowa Senator Tom Harkin, in an effort to soften the language in the committee report released later that year.
These overtures had no effect. The Senate panel’s scathing report accused Koch Industries of “systematic theft” and of engaging “in a widespread and sophisticated scheme to steal crude oil from Indians and others through fraudulent mismeasuring and reporting.” Based on documents subpoenaed from Koch, the committee reported that the company had stolen at least $31 million worth of oil in the previous three years alone.
The scandal played out a year before Mary Koch’s death, forcing her to bear witness to another wave of negative publicity concerning the family. After the Senate report’s release, Frederick, who left the investigations and legal maneuvering to Bill, sent an extract of the report to his mother with the most damning passages neatly underlined in red pen. It was an apparent effort to illustrate the righteousness of their legal battle against Charles and David, and to convince Mary that if Charles was capable of stealing from Native Americans, he had it in him to cheat his brothers. In a letter that accompanied the report, Frederick wrote that “the pattern of oil theft is so pervasive against Koch Industries” and the “evidence is too overwhelming” for Charles’s denial of wrongdoing to be taken seriously. “You must agree that Father would be appalled to observe the way his company reveals to the world today a callow lack of respect for those values which he held in high esteem—honesty and integrity.”
As if allegations of rampant larceny weren’t bad enough, the report also accused Koch Industries of investigating the private lives of committee staff. “One Koch employee in Oklahoma even went so far as to interview the ex-wife of a Committee investigator about the circumstances of their divorce,” the Senate report stated. In a separate episode, Elroy claimed that he had nabbed one of Koch’s investigators tailing him in Oklahoma City. He pulled the man from his car at gunpoint and snapped open his FBI credentials. “You might take a message back to your employer,” Elroy growled. “Your next person might come back in a body bag.”
Based on the committee’s investigation, the Justice Department opened a criminal probe into the oil-theft allegations, a case that it later closed without issuing indictments. Bill, meanwhile, launched another front in his legal bombardment. Since the alleged oil thefts had occurred on federal lands, depriving the government of royalties, he filed a whistleblower lawsuit under the False Claims Act for which he could claim a percentage of any money recovered.
Charles seemed caught off guard by Bill’s scorched earth tactics. “Why,” he wondered, “would someone in your own family try to get the U.S. government to brand you as a racketeer?”
In Bill’s bare-knuckled world the answer was simple: The charges “have a sting,” he said. “They bring people to the negotiating table sooner.” He admitted, “I was cold-blooded and Machiavellian about coming up with it.… I don’t want to see my brothers in jail. But I’m at war.”
Over the course of the litigation with his brothers, Bill often stressed that he was not acting based on emotion. This was business. He was merely a ruthless tactician plotting his way through a corporate conflict using every weapon (litigation, publicity, PIs) in his arsenal. But then, almost in the same breath, he expounded on grievances that went back to childhood—his absentee parents, poor self-image, the bully of an older brother who instigated fights between the twins, and who every time Bill neared the top of the storm cellar during games of King of the Hill, shoved him roughly to the ground. Bill seemed to consider the brutal legal in-fighting an adult version of King of the Hill. A game of dominance. “I almost wish,” he once said of Charles, “I would have started a fight with him 30 years ago.”
Sam Crow, the World War II veteran and onetime military judge shepherding the Koch v. Koch Industries litigation, saw clearly that congressional hearing rooms and courtrooms, especially his, had “become the stage for the unraveling of a family.”
In August 1997, after nearly a decade-and-a-half of legal skirmishing, Crow finally scheduled the case for trial the following April. He had whittled the suit, initially loaded with charges of secret Swiss bank accounts, hidden assets, and widespread racketeering, down to two claims: Koch had used devious accounting gimmicks, the plaintiffs alleged, to artificially understate its assets and operating profits as the company and the dissident shareholders brokered the buyout. The other charge was that Charles and the company’s management had deceived Bill, Frederick, and the Simmons family about expansion plans at Koch’s Pine Bend refinery in Minnesota and an associated pipeline deal that vastly improved Koch’s competitive position in the Midwest. Because of these alleged deceptions, the plaintiffs believed Koch Industries had defrauded them by as much as $2 billion, adjusting for inflation and interest.
Motions piled up on Judge Crow’s desk in the months leading up to the trial, both sides jousting over what evidence he should permit. Koch fought efforts by Bill’s legal team to present information that it had destroyed incriminating documents during discovery. Bill’s lawyers, meanwhile, battled to keep the defendants from highlighting their client’s “lifelong history of feelings of inferiority,” “obsessive hatred” toward his brothers, and background of psychoanalysis. Citing Bill and Frederick’s attempt to drag their late mother into court against the advice of her doctor, Charles and David’s attorneys argued that these topics were indeed fair game. “These are not the acts of rational men; these are the acts of a man consumed by hatred and willingly followed by his weaker brother.”
The public relations war also heated up in anticipation of the trial. Both sides traded accusations that the other had tried to unduly influence the jury pool through media interviews, television ads, and sly public opinion polls, including one testing the waters for Bill’s nascent Senate candidacy.
Judge Crow, feeling much like a parent disciplining squabbling children, finally intervened. “The court almost forgets that this complex litigation involves claims for hundreds of millions of dollars,” he wrote in a ruling that silenced both sides with a gag order. “Unfortunately, the court is instead reminded of a childhood tussle on the school playground—followed by the inevitable volley of finger pointing accompanied by a chorus of participants shouting the defensive retort of ‘He started it,’ as the teacher approaches to break up the fray.”
On a warm, clear afternoon in early April 1998, the four Koch brothers arrived at the Frank Carlson Federal Building in Topeka. It was a bitter kind of reunion, the first time in years they had all been in the same place—even the same time zone. When they saw each other at all anymore, the venue was always a sterile courtroom.
A scrum of reporters and TV crews had converged in front of the charmless, redbrick building to catch the feuding brothers as they arrived. Dodging the press, Bill and Frederick slipped into the courthouse through a rear entrance. Charles and David, accompanied by their fashionably dressed wives, parked in a nearby garage, strode past the media, and entered through the front door.
Inside the courtroom, the two sets of brothers avoided eye contact. They chatted quietly among themselves, doing their best to appear impassive. The seating had even been arranged so the warring siblings could avoid each other. Steering clear entirely, however, was impossible. When in the weeks ahead the brothers occasionally passed one another in the narrow corridors of the courthouse, they did so as ghosts, leaving nothing in their wake but a tingling, combustible tension in the air.
The court summoned a pool of sixty potential jurors at the start of the trial. At least as many lawyers and paralegals seemed to be buzzing around the courtroom at times. Led by the esteemed Chicago trial lawyer Fred Bartlit Jr., who a couple of years later would help George W. Bush litigate his way to the Oval Office, the plaintiffs’ legal entourage alone occupied three floors at the Ramada in downtown Topeka (the trial had been moved there from Wichita in order to find jurors untainted by opinions on the Koch brothers). By one estimate, Bill’s legal tab had surpassed $200,000 per week.
Working-class farmers, truck drivers, teachers, and retirees composed the bulk of the jury pool. They were the kind of people who settled family disputes in the living room, not the courtroom. For them, a legal feud of these dimensions was unfathomable, as was the ten-figure sum involved. It would be hard to paint the brothers, especially Bill and Frederick, in any sympathetic light. “There’s no poor people in this case,” Bartlit told one potential juror. “Everybody’s rich. That’s just the way it is.”
As the lawyers weeded them out, they asked jury candidates for their reactions to a particular statement. “Business is war and anything goes.” Agree or disagree?
“Let me take you back and tell you the story of a truly fascinating Kansas family.” A silk handkerchief peaked neatly from the pocket of his tailored suit. Not a gray hair was out of place. His ramrod posture recalled his military training as a West Point cadet and Army Ranger. Surveying the six-man, six-woman jury with an eyebrow cocked, Fred Bartlit looked every inch the power lawyer as he delivered his opening statement in a forceful, booming voice.
“This family was unusual,” he continued, “because they grew up in a very litigious atmosphere. Fred Koch, the patriarch, invented ways of refining very heavy oil, very heavy, thick oil.… The major oil companies took him to court, and he had many, many long years of court fights and he sometimes was on the verge of losing, but he was a fighter. Around the family dinner table, it was unusual, because the talk was of litigation, the talk was of you’ve got to stick up for your rights, and you never, never quit no matter what. That’s what these boys—these men—learned from their dad. They grew up hearing about court fights, and in this family, this unusual family, conflict got to mean going to court.”
Continuing his portrait of a family that gave new meaning to dysfunction, Bartlit told the jury that the case “was about a man’s driving need for total control and total power.” It was about how “Charles Koch went above the law in this country and also how he went above the ordinary rules that we live by in dealing with our own family.
“No verdict is going to fix this family at this point,” the lawyer said. “… Fortunately, your job as jurors is not to fix the family, but to sort out the hard evidence, look at the proof… and that’s much easier than figuring out where a family went wrong.”
Where Bill had flown in a shock troop of legal heavy hitters, Charles stayed the course with his family’s longtime lawyer Bob Howard and the local Wichita law firm of Foulston Siefkin. The contrasts between Howard and Bartlit were hard to miss. A native Kansan, Howard wore a slightly rumpled suit, spoke in nasal tones, and had a mild, folksy manner. Howard’s unassuming appearance belied a masterful legal tactician, and one who knew the Koch clan inside and out. Having represented Charles, David, and their late mother since the 1980s, the sixty-seven-year-old lawyer knew most of the skeletons in the family’s closet.
“The plaintiffs in this case seek to label this a pure business dispute,” Howard told the jury, flipping through his notes. “It isn’t. It’s a dispute that arose of family strife and family conflict.” At its root were “deteriorating… interpersonal relationships” and money-hungry family members who, unlike Charles, did not want to grow Koch Industries but to loot it of its profits.
“That’s what this lawsuit is about,” Howard said, “a continuation of a bitter family fight that should have been settled in 1983 when we paid $1.1 billion for peace that has never come to Kansas.”
David Koch took the stand in mid-April, the first of the four Koch brothers to testify. The fifty-seven-year-old executive vice president of Koch Industries endured three days of questioning. His testimony veered from impenetrable technical matters about the refinery expansion to details about the brothers’ boyhood rivalry: “We were strong-minded, head-strong individuals,” he said at one point. “Of course, yeah, we competed, but I don’t think it was excessive.”
Bill’s lawyer asked him one afternoon about his twin’s firing. Why in the boardroom that day had David abstained from voting to kick his brother out of the company? His face flushed. “Well,” he began. “I have very strong feelings for my brother, and I wanted…” He trailed off, bringing his hand to his forehead. “This is tough to talk about. Boy.”
David tried to fight through the deep well of emotion that had pooled within. “Bill had acted very badly in the company,” he said, his voice breaking. “He’d done some terrible things.” The businessman began to sob, his sorrow amplified throughout the rapt courtroom by the microphone clipped to his tie. Across the room, Charles lifted his glasses to dab a tear. Bill stared down at the table in front of him.
“Mr. Koch, do you want a recess?” the judge asked.
“I think I can get through it here.” David paused to collect himself. “I just didn’t want him to act this way. I wanted him to behave himself, do a good job, and he wouldn’t, and he deceived me, but I wanted to help him out. I wanted to maintain my relationship with him. I just couldn’t vote against him, but I knew he couldn’t work in the company anymore, so it was my desperate desire to try to maintain a relationship with him.”
Frederick took the stand on May 1. Provincial Topeka, surrounded by brothers he had almost nothing in common with, was surely the last place he wanted to be. Give him London, New York, or Monte Carlo—anywhere with a whiff of sophistication and a thriving auction scene. Shorter than his six-foot-plus brothers, with the delicate features of his mother, the sixty-four-year-old had sat quietly through the proceedings, a curiosity to the members of the press covering the trial. “He was so quiet and so almost like a nonfactor, like he didn’t want to be there,” remembered someone who attended the trial.
Frederick had a reputation as a recluse, based largely on his preference for staying out of the media, not sequestering himself at home. He was active with various arts and cultural organizations, including the Metropolitan Opera, the Royal Shakespeare Company, and the Pierpont Morgan Library, and he was a regular at New York galas and fund-raisers. But even some people who had known him for years considered him an enigma. Of all of the Koch brothers, even Charles, he was the most relentlessly private. Frederick made his employees sign strict nondisclosure agreements, vowing that they would not divulge anything about their employer to anyone, and especially the press.
He was hard to read—most in his element when talking about art or literature or theater—and his genteel demeanor could turn frigid without warning. A man of contradictions, he thought little about dropping six figures at Sotheby’s, but could also be bizarrely frugal, growing angry at his staff if they added too much postage to letters and packages. He spared no expense when it came to refurbishing his homes, but he preferred taking the public bus in New York and typically flew commercial.
One associate recalled strolling down East 80th Street with Frederick on a sweltering summer afternoon in the mid-1990s. Crossing Fifth Avenue, Frederick noticed a nickel in the middle of the crosswalk; it had been run over so many times that it was embedded in the asphalt. His companion looked on in shock as Frederick stooped down, took out his keys, and began trying to pry the coin loose. The multi-millionaire continued to work as the traffic light changed. Traffic bore down and horns blared, but Frederick kept digging, finally dislodging the nickel. “I got it,” he said, holding the coin up with a beatific expression on his face. “I just was dumbfounded,” his companion recalled. (“I never pick up coins in the street,” Frederick said, “despite this apocryphal account.”)
“Today I’m largely involved in charitable activities,” Frederick told the court. He affected a noticeable British accent from the time he had spent in England overseeing the ten-year renovation of Sutton Place, where Frederick had displayed his collection of nineteenth-century paintings. “The house is now open to the public. It’s one of the most popular attractions within the environments of London. We’re completely sold out two years in advance.”
The eldest Koch brother’s testimony was relatively brief. He knew nothing of the oil business or the inner workings of the family company. In the court drama, Frederick and David were the supporting actors. Charles and Bill were the trial’s star witnesses.
Bill was suffering from a cold when he began the first of seven grueling days of testimony. Bartlit launched his examination of his client with a series of rapid-fire questions designed to dispense with the notion that Bill had staged a boardroom coup with the aim of deposing Charles.
“First, did you ever want your brother, Charles, out of Koch Industries?”
“Never,” Bill replied, his voice slightly hoarse.
“Did you ever want him removed as CEO of Koch?”
“No.”
“Did you have any feelings of jealousy towards your brother Charles?”
“No.”
“Now,” Bartlit said, “let’s talk about the 1980 proposal to expand the board of directors. What was the purpose of that proposal?”
“The purpose,” Bill replied, “was to create a democratic board that represented all of the shareholders proportionally, one man, one vote.”
Bill portrayed his brother as a dictatorial chief executive who didn’t tolerate dissent and whose management practices and antigovernment philosophy had caused Koch Industries to run afoul of regulators. “I didn’t want to see the company go down for legal problems or ethical problems,” he testified.
When Howard’s turn came, the attorney chiseled away at Bill’s testimony.
Wasn’t it true that Bill had voted in 1982, when he still had a seat on Koch’s board, to oust Charles as the company’s CEO?
“Yes.” So he had, in fact, tried to depose his brother, even if this hadn’t been the original goal of his boardroom putsch.
And hadn’t he also voted against David continuing on as an executive officer of the company?
“I may have.”
Question by question, Howard highlighted Bill’s efforts to extract money from Koch Industries at any cost, even if it meant breaking up the company his father had started by selling his holdings to a corporate raider, such as T. Boone Pickens, or Saudi investors.
“You wanted to continue to grow the company, or you wanted to put it up for grabs to corporate raiders and corporate takeover artists to see if you couldn’t get the highest possible dollar to your shares?” Howard probed.
“I had mixed feelings. My feelings were, on the one hand, I wanted to be purely an economic man, get the best economic deal; and on the other hand, I had a lot of emotional attachment to the company.… There came a time when those feelings shifted, however.”
“And in the competition between the two halves of yourself,” Howard asked, “what won out was get the highest price, wasn’t it?”
“Oh, eventually, that’s what won out,” Bill acknowledged.
When Charles testified in late May, Bill looked away from the witness stand. During the proceedings, one trial attendee recalled, Bill “was like a caged animal. He was ready to attack.”
Charles may have been the CEO of a large, multinational company, but he was nevertheless uncomfortable with public speaking. “Work for Koch Industries,” he said quietly when asked to state his profession. It was classic Charles. He didn’t say that he ran Koch Industries, that he was the company’s chairman and chief executive. He just worked there, like thousands of others.
Charles testified haltingly, sometimes fumbling for words, but he ceded little ground. Early on, he upended the notion, advanced by Bartlit, that Fred Koch had taught his sons that “if you can’t work things out around the table… you go to court and you fight and fight and fight.”
“What I recall is the opposite,” Charles said. “My father had gone through a nightmare of litigation from 1929 to 1952, and as part of that, he’d countersued, which lasted a number of years. His saying about that is, ‘That was a mistake, that was a terrible mistake.’ He said, ‘Never sue.’ He said, ‘Out of those lawsuits, I finally settled. I settled for a million and a half dollars. The lawyers got a third, the government got a third, and I got a third, and I ended up with my business destroyed.’ So he said, ‘never sue,’ those were his words.”
Later, as he recounted the family’s last Christmas together in 1979, when Bill had launched into a tirade that had brought their mother to tears, Charles appeared to stare directly at his brother as he spoke: “He accused her of being a bad mother, of not loving him, and that whatever problems he had were largely her fault.”
Bill never looked up from the table in front of him.
Week after week, as the trial slogged on, Charles and David, sometimes accompanied by their wives, flew to Topeka on Sundays, returning home for at best a few days at the end of the week—Charles to Wichita, David to New York. Then they began the whole exhausting ritual all over again.
During the trial, the brothers rented a Topeka mansion that had belonged to a member of the Menninger family, who had founded a famous psychiatric clinic and sanitarium in the city. Charles and David’s daily routine varied little. The brothers convened for breakfast with their lawyers and advisors to prep for trial, then caravanned over to the courthouse in black SUVs. They concluded the day in a similar fashion, debriefing with their lawyers and advisors over dinner.
The long legal battle had taken a noticeable toll on each of the brothers, but perhaps none more so than Charles. The typically energetic CEO wasn’t sleeping well. He looked drawn and haggard. It was not just his company but his values that were under assault.
“No question—that was the hardest period of Charles’ life. Beyond anything I could describe,” said Leslie Rudd, Charles’s close friend.
Gerald O’Shaughnessy, another close friend, observed that he had “never quite seen him so… distracted and preoccupied.”
In the months before the trial, Charles was aloof and withdrawn. Perhaps for the first time since he had gone to work for his father’s company in 1961, he seemed disengaged from the business. “I frankly didn’t think he was that focused on the company then,” said a former Koch executive. “During that period there were a bunch of questionable deals.”
Exhibit A was Koch’s $670 million acquisition of Purina Mills, completed several weeks before Koch v. Koch Industries went to trial. Before year’s end, the feed company filed for Chapter 11, inflicting major losses on Koch Industries. And by April 1999, this and other bad bets on its agriculture businesses forced hundreds of layoffs at the company, as Charles and the company’s management struggled to turn around money-losing divisions or extricate themselves entirely. “The company had a couple of people who are gone now who just shouldn’t have had as much authority as they did,” recalled Tony Woodlief, who went to work as a Koch management consultant in March 1997 and later became a vice president of Charles’s charitable foundation. “They talked a good game and then they made some really stupid decisions.… Charles, you cannot get an ounce of bullshit past him, but at that time he was so checked out.”
Throughout the eleven-week trial, Charles watched the proceedings almost expressionless, even while Liz, his fiercely loyal wife, struggled to stifle her anger as Bill and Frederick’s lawyers painted her husband as a tyrant and a cheat. His wooden demeanor masked the inner tumult of watching his family’s private drama splayed out for the world to see. The litigation, the former Koch executive said, was “crushing” Charles. “You could see a side of Charles that no one had ever seen before and no one will likely ever see again. That trial—destroyed him is not the right word. It was as if he had aged 40 years.”
On Tuesday, June 16, after two-and-a-half months of testimony, Bartlit and Howard delivered their closing arguments. “The only thing that people like this recognize, unfortunately, is money,” Bartlit told the jury, arguing that Koch’s management had displayed the “attitude of somebody who will do it again unless they get more than a slap on the wrist.”
Howard called the case a “modern parable. And the moral is, beware of a brother driven by the need for more money, by greed, and by the desire to rule or ruin, because if you don’t, you’re in for 20 years of corporate warfare.”
Koch Industries had hired Courtroom Sciences Inc., the consulting firm cofounded by “Dr. Phil” McGraw, to advise on the case and empanel a shadow jury, who reported daily on their impressions of the evidence and testimony presented at trial. The shadow jurors were told that their participation was solely for research purposes, but the electronic keypad lock on the room they were interviewed in and the anti-eavesdropping devices affixed to its walls suggested the endeavor was not just academic. Their true purpose was to give Charles and David’s legal team a glimpse into the psyche of the jury and the arguments and evidence they had been swayed by.
While the real jury deliberated, the CSI consultants delivered their verdict to Charles and David at the Menninger house. The brothers, the consultants said, needed to prepare themselves for the worst. “The CSI guys said you need to focus on loss—you guys have lost,” said someone familiar with this conversation. “David shut down.” In the event of a loss, one of the brothers might have to make a statement to the press. “Fuck it,” David said. “I’m not doing it.”
At 9:45 a.m. on June 19, when the jury sent a message to Judge Crow that they had reached a verdict, Charles and David were far from Topeka. David had returned to New York, where Julia was expecting the birth of their first child later that summer. Charles was trying to occupy himself with work in Wichita. Frederick, too, was MIA; he had flown back to Europe.
But Bill had remained in Topeka to anxiously await the verdict. It was only natural, since he had invested so much of his time and money into the case.
Judge Crow recessed the court and summoned the lawyers into his chambers to review the verdict. Bartlit emerged grim-faced not long after. “They’re guilty of misrepresentation,” he told Bill, “but it’s not material.” The jurors, in other words, believed that Koch Industries had concealed some facts during negotiations with the shareholders, but determined these omissions did not significantly affect the sale price. There would be no damages. Charles and David had prevailed.
Word of the victory spread quickly at Koch’s Wichita headquarters, where an e-mail circulated late Friday morning informing the staff that “the jury unanimously ruled, as we’ve always known, that Bill Koch and the other shareholders were treated fairly when their stock was purchased for more than $1.1 billion.” Charles delivered the news to David by phone. The trauma of the trial behind them, the brothers both wept with relief.
Charles and David knew their battle with Bill was nowhere near over; Charles had resigned himself to the fact that Bill would keep coming at him as long as he had “breath or money.” But they had won a key battle.
Bill’s team, offering its own spin on the trial’s outcome, trumpeted in a press release that “Jury Finds Koch Industries Guilty of Misrepresentation.” Bill called the verdict a “moral victory.” But symbolic triumphs mattered little to the America’s Cup–winning skipper. In reality, he was shattered, and in the coming months a familiar gloom shrouded his life.
After the verdict, reporters cornered Bill outside the Topeka courthouse and peppered him with questions. Defiant, Bill announced that he would appeal. “These guys are crooks. In my opinion,” he said, “this is the 10th round of a 15-round championship fight.”